In 1895, military defeat forced China to cede Taiwan to Japan. Taiwan reverted to Chinese control after World War II. Following the Communist victory on the mainland in 1949, 2 million Nationalists fled to Taiwan and established a government using the 1946 constitution drawn up for all of China. Over the next five decades, the ruling authorities gradually democratized and incorporated the native population within the governing structure. In 2000, Taiwan underwent its first peaceful transfer of power from the Nationalist to the Democratic Progressive Party. Throughout this period, the island prospered and became one of East Asia's economic "Tigers." The dominant political issues continue to be the relationship between Taiwan and China - specifically the question of eventual unification - as well as domestic political and economic reform.

Republic Day (Anniversary of the Chinese Revolution), 10 October (1911)

Constitution:

25 December 1946, amended in 1992, 1994, 1997, 1999, and 2000

Legal system:

based on civil law system; accepts compulsory ICJ jurisdiction, with reservations

Suffrage:

20 years of age; universal

Executive branch:

chief of state: President CHEN Shui-bian (since 20 March 2004) and Vice President Annette LU (LU Hsiu-lien) (since 20 March 2004)
head of government: Premier (President of the Executive Yuan) YU Shyi-kun (since 1 February 2002) and Vice Premier (Vice President of the Executive Yuan) LIN Hsin-yi (since 1 February 2002)
cabinet: Executive Yuan appointed by the president
elections: president and vice president elected on the same ticket by popular vote for four-year terms; election last held 20 March 2004 (next to be held in March 2008); premier appointed by the president; vice premiers appointed by the president on the recommendation of the premier
election results: CHEN Shui-bian elected president; percent of vote - CHEN Shui-bian (DPP) 50.1%, LIEN Chan (KMT) 49.9%

Legislative branch:

unicameral Legislative Yuan (225 seats - 168 elected by popular vote, 41 elected on the basis of the proportion of islandwide votes received by participating political parties, eight elected from overseas Chinese constituencies on the basis of the proportion of island-wide votes received by participating political parties, eight elected by popular vote among the aboriginal populations; members serve three-year terms) and unicameral National Assembly (300 seat nonstanding body; delegates nominated by parties and elected by proportional representation within three months of a Legislative Yuan call to amend the Constitution, impeach the president, or change national borders)
note: the number of seats in the legislature will be reduced from 225 to 113 beginning with the election in 2007
elections: Legislative Yuan - last held 8 December 2001 (next to be held in December 2004)
election results: Legislative Yuan - percent of vote by party - DPP 39%, KMT 30%, PFP 20%, TSU 6%, independents and other parties 5%; seats by party (2003) - DPP 88, KMT 66, PFP 46, TSU 12, independents and other parties 13

Judicial branch:

Judicial Yuan (justices appointed by the president with consent of the Legislative Yuan)

Political parties and leaders:

Democratic Progressive Party or DPP [CHEN Shui-bian, chairman]; Kuomintang or KMT (Nationalist Party) [LIEN Chan, chairman]; People First Party or PFP [James SOONG (SOONG Chu-yu), chairman]; Taiwan Solidarity Union or TSU [HUANG Chu-wen, chairman]; other minor parties including the Chinese New Party or CNP

Political pressure groups and leaders:

Taiwan independence movement, various business and environmental groups
note: debate on Taiwan independence has become acceptable within the mainstream of domestic politics on Taiwan; political liberalization and the increased representation of opposition parties in Taiwan's legislature have opened public debate on the island's national identity; a broad popular consensus has developed that Taiwan currently enjoys de facto independence and - whatever the ultimate outcome regarding reunification or independence - that Taiwan's people must have the deciding voice; advocates of Taiwan independence oppose the stand that the island will eventually unify with mainland China; goals of the Taiwan independence movement include establishing a sovereign nation on Taiwan and entering the UN; other organizations supporting Taiwan independence include the World United Formosans for Independence and the Organization for Taiwan Nation Building

International organization participation:

APEC, AsDB, BCIE, ICC, ICFTU, IOC, WCL, WTrO

Diplomatic representation in the US:

none; unofficial commercial and cultural relations with the people of the US are maintained through an unofficial instrumentality, the Taipei Economic and Cultural Representative Office (TECRO) in the US with headquarters in Taipei and field offices in Washington and 12 other US cities

Taiwan has a dynamic capitalist economy with gradually decreasing guidance of investment and foreign trade by government authorities. In keeping with this trend, some large government-owned banks and industrial firms are being privatized. Exports have provided the primary impetus for industrialization. The trade surplus is substantial, and foreign reserves are the world's third largest. Agriculture contributes 2% to GDP, down from 32% in 1952. While Taiwan is a major investor throughout Southeast Asia, China has become the largest destination for investment and has overtaken the US to become Taiwan's largest export market. Because of its conservative financial approach and its entrepreneurial strengths, Taiwan suffered little compared with many of its neighbors from the Asian financial crisis in 1998. The global economic downturn, combined with problems in policy coordination by the administration and bad debts in the banking system, pushed Taiwan into recession in 2001, the first year of negative growth ever recorded. Unemployment also reached record levels. Output recovered moderately in 2002 in the face of continued global slowdown, fragile consumer confidence, and bad bank loans. Growing economic ties with China are a dominant long-term factor. Exports to China - mainly parts and equipment for the assembly of goods for export to developed countries - drove Taiwan's economic recovery in 2002. Although the SARS epidemic, Typhoon Maemi, corporate scandals, and a drop in consumer spending caused GDP growth to contract to 3.2% in 2003, increasingly strong export performance kept Taiwan's economy on track, and the government expects Taiwan's economy to grow 4.1% in 2004.

involved in complex dispute with China, Malaysia, Philippines, Vietnam, and possibly Brunei over the Spratly Islands; the 2002 "Declaration on the Conduct of Parties in the South China Sea" has eased tensions but falls short of a legally binding "code of conduct" desired by several of the disputants; Paracel Islands are occupied by China, but claimed by Taiwan and Vietnam; in 2003, China and Taiwan asserted claims to the Japanese-administered Senkaku Islands (Diaoyu Tai) with increased media coverage and protest actions

Illicit drugs:

regional transit point for heroin and methamphetamine; major problem with domestic consumption of methamphetamine and heroin; renewal of domestic methamphetamine production is a problem